WASHINGTON – According to a report released Friday by the Democratic-led Congressional Oversight Committee, the Treasury Department privately encouraged existing customers to prioritize when issuing loans for the federal government’s small-business coronavirus assistance program.
The Treasury Department’s actions were one of several ways in which the Trump administration and several large banks held ineligible businesses, including women and minority-owned people, while applying for a $ 670 billion paycheck protection program, That the House Select Subcommittee reports coronavirus virus. Banks and other lenders issued PPP loans, and the Small Business Administration guaranteed them.
The report states that documents obtained by the subcommittee instruct the PPP lenders to “go to their existing customer base” when issuing loans to the Treasury Department.
A Treasury Department spokesman said, “We encouraged all banks to make loans to their existing small business customers, but no Treasury official suggested that banks should include new customers.” “The Subcommittee’s conclusion to the contrary is incorrect and unsupported by its record.”
The SBA did not immediately comment on Friday.
On March 28, the day after the legislation establishing the PPP came into force, American Bankers Association president Rob Nichols emailed the board of the trade group about a call with Treasury officials the previous day. According to the report, according to the email, “Treasury would like banks to visit its existing customer base.” “It will allow loans to move quickly,” Mr. Nichols said.
A spokesman for the American Bankers Association said on Friday that the email was “ABA trying to assist the government in getting the PPP program off the ground amid an epidemic that shows the length.” He said that while banks initially processed loans faster for already-known customers, “over time this new and unprecedented program made it easier to gather information to process new customers.”
JPMorgan Chase & Co. a senior banker.
The report noted that the congressional panel said that “there was already an understanding from the Treasury that banks were working with existing customers.” ”
JPMorgan spokesman Steven Menuchin said that given the regulatory requirements from time to time to pursue new customers, and the need for struggling businesses to move very fast, we initially focused. For this reason their own banks
One concern for banks in the early days of PPP was that new customers were challenged to vet on time to process their loans quickly, when companies were preoccupied with applications. Federal law generally requires banks to thoroughly investigate new customers to prevent money laundering.
“The members of Congress drafting this report are directly highlighting the issues they have structured the program and banks during the implementation of their and SBA breakups,” a consumer group, Consumer Bankers Association chief executive Richard Hunt said. retail banks. Mr. Hunt said the program’s average loan size, $ 100,729, proves that “banks are able to reach the businesses that need them most.”
Employees expressed concern in an internal April 4 presentation that “a policy of not taking non-customers may increase the risk of disproportionate impact on minority and women-owned businesses,” the report noted.
A representative of Citigroup did not immediately comment. The report states that Citigroup has partnered with Community Lenders to help those demographic groups.
The congressional panel reviewed eight of the largest US banks and said that seven of them gave PPP to existing customers.
The paycheck security program was filled with complaints when it opened in early April, as some lenders preferred customers with existing relationships, despite rules issued by the Trump administration that the program was “first come, first served”.
The initial round of funding ended early, leading to the closure of many smaller companies, while many large, well-known companies received loans. Some of those companies later returned the money after a public backlash. Many businesses that struggled early to obtain loans eventually got them.
Small-business advocates, members of Congress of both parties, and the own Inspector General of Small Business Administration have expressed concern that the implementation of the PPP has made it difficult for some groups to use the program, including minorities and business owners in rural areas . A report released in August by the Federal Reserve Bank of New York concluded that sectors with a greater number of black-owned businesses could receive lower PPP loans due to weak ties with financial institutions.
The panel’s report is part of a continuing investigation into the implementation of PPP. It also alleged that the Treasury Department and the SBA failed to provide guidance to lenders to prioritize undersubscribed markets, contrary to Congress’ intentions. Agencies have already disputed that claim, citing their push for community-based lenders to issue loans.
Write Amara Omeokwe at [email protected] and Ryan Tracy at [email protected]
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